The Roller Coaster Ride of Options
Luckily, I still have a couple of years to wait for this trade to win. But PayPal, which was up briefly when I opened the vertical call spread, has now gone down, and the profits I had in that spread have gone away. So, let’s put that trade aside for now. PayPal will recover.
I also recently opened up a trade on the S&P 500 index – SPY ETF.
SPY is a really popular ETF for options trading. In fact, they have options that expire daily. You could, if you wished, open up an options trade now that would expire this afternoon. That’s some real gambling, there.
Of course, doing a trade on a Monday that expires on the Friday of the same week is also gambling.
I opened a LONG STRADDLE on SPY at the beginning of this week. A long straddle profits if the underlying goes up OR down, but loses money if it stays the same.
So on Monday, Sept 18, I opened up an “at-the-money” long straddle on the S&P 500 index. I paid $5.33 for one contract at a $443 strike.
I was betting that the S&P 500 would be much higher or lower than 4430 by the end of today. Since it was “at-the-money” on Monday, I was betting for a move down or up this week.
Thankfully, the S&P complied with my wish.
The reason I felt confident making this bet was that the Federal Reserve was making its interest rate decision on Wednesday afternoon. They were either going to raise rates again or keep them steady. Either outcome would have caused the stock market to move one way or the other. So I was betting that the Fed would make things volatile. Thanks, Jay Powell!
I sold the position today for $10.67. A big profit!
Since I was only trying one contract, I bought the position for $533 and sold it for $1067, making a 100% profit.
I wish I could do this every week. 🙂
I’m looking at another long straddle for next week, but the prices are a bit rich. Maybe it’s always like that. Right now, that would cost me around $7.25 for a $432 long straddle, which I feel is a bit expensive. Can I pay $5 again?
The S&P 500 would need to go up to 4400 by Friday (up 1.7% from current levels) or down to 4247 (down 1.8%). That’s almost 2%! That’s a big move for a week…
Ahhh, what to do, what to do…
